Thanks a lot for all your help Givonnai
here is the story..
1> I did
C:\>echo %catalina_home%
I got
C:\Program Files\Apache Software Foundation\Tomcat 5.5
I checked entry of catalina_home in environment variables
there it was exactly same - C:\Program Files\Apache Software Foundation\Tomcat 5.5
2> I did
C:\>echo %classpath%
I got
;C:\Program Files\Apache Software Foundation\Tomcat 5.5\common\lib\servlet-api.jar(missing ;classes;. in the end)
I checked in enviroment variables
I got it same
-;C:\Program Files\Apache Software Foundation\Tomcat 5.5\common\lib\servlet-api.jar
(although my memory is keeping telling me- sweey you did set it up with ;classes;.)
3> I changed classpath in the environment variables and tried to compile with
C:\Mon\javu\MyProject\beerV1\src\com\example\web>javac BeerSelect.java
Got the same error again - class not found
4> I tried again to compile it from the directory this time
C:\Mon\javu\MyProject\beerV1>javac -d classes src\com\example\web\BeerSelect.java
Class compliled successfully.
Thanks a lot all of you guys, especially Givonnai
One last question - I have seen in other forums that people suggesting classpath of both - your development diectory and your deployment directory should be there in your environment variables, do we need to give the path of development directory also in the classpath with a ; in between.